How to prepare for a short sale of investment property?
Tuesday, March 2nd, 2010 at
2:19 am
We had a condo for rent, but the rental market has sunk to the point where it is a losing investment. We have listed the property for sale, but in a few months will not be able to carry the mortgage of the investment property. If the property does not sell before then, we may need to do a short sale (if the bank agrees) or worse, deal with foreclosure. To plan for a possible worst case scenario, should I consult with the bank now or wait? Should I meet with my CPA now? Is there value in meeting with a real estate attorney, too? Obviously money is tight, but I want to be prepared.
Rent Back
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Tagged with: Condo For Rent • Cpa • Investment Property • Worst Case Scenario
Filed under: rent property
Talk to your lender.
For short sale, you’ll have to prepare a lot of paper works to show that you’re no longer able to afford the mortgage payment including your rental income and disclosing ALL your other financial situation. Beware that if short sale unsuccessful then your property will go into foreclosure which by then the bank already have a WHOLE picture of your financial situation and properties you own. They might go after you for the amount you owe and may affect your primary residence as well.
Edit: Please read the following article, it worth to read especially yours is an investment property. It explained the difference of judicial foreclosure and non-judicial (trustee) foreclosure. If you don’t want to lose your primary house…READ
I suggest you consult an attorney ASAP before contact with your lender.
First off, ask your lender for a forbearance agreement until you can find renters. If that fails, then follow this path to your short sale:
Talk to your CPA to see if he can write off the negative impacts of a short sale or foreclosure as a business loss.
Talk to a real estate attorney to go over your loans to see what recourse, if any, the lender might have or what leverage you might have.
Then talk to a short sale real estate agent to do a short sale.
Good Luck
It takes a lot of time to work a short sale file and you should start now but do not do it alone and on the phone. Consult with CPA to determine your tax situation as any debt forgiven will be considered as taxable income to you. An attorney would be helpful particularly if you expect to have to defend against a foreclosure action but the cost to use one for the short sale neg. may be much higher than using a good short sale service.